The topic of this episode is “Why is Congress struggling to manage the nation’s finances?”

My guest is Representative David Schweikert of Arizona. He was first elected to Congress in 2011. Prior to that, he was a businessman, served in Arizona’s state legislature, and as Maricopa County Treasurer.

He is a Republican and holds a seat on the Ways and Means Committee, which writes tax policy. David also is the Vice Chairman of the bicameral Joint Economic Committee (JEC) and co-chairs both the Blockchain and Telehealth caucuses. He is passionate about economics and finance, which makes him an excellent person to ask, “Why is Congress struggling to manage the nation’s finances?”

Kevin Kosar:

Welcome to Understanding Congress, a podcast about the first branch of government. Congress is a notoriously complex institution, and few Americans think well of it. But Congress is essential to our republic. It's a place where our pluralistic society is supposed to work out its differences and come to agreement about what our laws should be.

And that is why we are here: to discuss our national legislature and to think about ways to upgrade it so it can better serve our nation. I'm your host, Kevin Kosar, and I'm a resident scholar at the American Enterprise Institute, a think tank in Washington DC.

Dave, welcome to the podcast.

David Schweikert:

Kevin, thank you for having me.

Kevin Kosar:

What is the state of the federal budget? Do we even have one in 2024?

David Schweikert:

That is sort of the magic question. You have one, but it is not the one you want. In many ways, we are operating on the spending authorization from previous years, which has been renewed over and over. In other words, we are funding things that were supposed to have expired and not funding things that we are supposed to be getting ready to do.

It is the absurdity of a dysfunctional Congress. Priorities that go back to when Nancy Pelosi was speaker are still being funded today.

Kevin Kosar:

Why is that?

David Schweikert:

I actually have an overarching theory, and then we can get into the nitty-gritty of some of the chaos. There is a general lack of understanding of the level of financial stress that the US Congress and the entire country are under.

We play this bookkeeping game in the United States of, here is publicly borrowed money, and here is the money we are borrowing internally. On Friday (February 23, 2024), I believe we hit an all-time record of borrowing about $92,000 a second. Now you hit this sort of constant stress where every dime a member of Congress votes on now is on borrowed money: all defense and all non-defense discretionary.

If my math is correct, we are going to borrow almost a trillion dollars of Medicare into mandatory this year. So now, you come back and you get a member who is all excited, saying he is going to cut spending on HHS (Department of Health and Human Services), some other agency, or some part of discretionary, and he is going to save $500 million.

That is a lot of money. But when you are borrowing about $7.5 billion a day, many of the fights we are having are over a few hours’—if not just a couple days’—worth of borrowing. It is a way we can look like we are doing something because we are terrified of getting in front of a camera and telling the American public that 100% of borrowing for the next 30 years will be interest, healthcare costs, almost all Medicare, and backfilling the Social Security Trust Fund—if we decide to backfill it.

Kevin Kosar:

Those are astounding numbers. I think it was on Friday you tweeted out some numbers on the national debt, including a figure of how much we are racking up per second. If memory serves, our national debt is north of $30 trillion. Is that right?

David Schweikert:

We are currently at around $34.3 trillion right now. You are going to hear apologists go out and say, “We're only $27 trillion publicly borrowed.” The absurdity of that is you still have to pay back the several trillion dollars you have borrowed from Social Security, the Medicare trust funds, the Highway Trust Fund, railroad retirement trust, etc. And you will have to pay back with interest. And because you do not actually have enough tax receipts, you are going to borrow the money to pay back the very money you have borrowed.

Kevin Kosar:

That’s not good. I would be quite concerned if I had an uncle or somebody who was borrowing money to pay money that he had borrowed.

David Schweikert:

And I only bring it up because this is my moment to tell those out there in the intelligentsia in Washington, DC who were mocking me and my JEC economists about four or five months ago when we were saying interest will be a $1 trillion—over $1 trillion gross—in the 2024 fiscal year. Well, a couple of weeks ago, Treasury confirmed that.

That makes interest the second biggest expenditure after Social Security in your federal government—more than Medicare, more than defense.

Kevin Kosar:

I recall a book from some years ago by Eugene Steuerle, who has written on and thought about budget matters for a very long time. He spoke of the deficits and debt and the crowding effect it can have, and he called it “a loss of fiscal democracy”, because you just do not have as many choices now because you are locked in so many things.

David Schweikert:

And in a weird way, it goes back to your previous question. Why don't you have a rational budget? Why don't you have rational appropriations? Why can't you do rational policy? How do you do those things when you now have to go home and explain to your voters that waste and fraud is huge, but still small compared to what we are borrowing? All foreign aid might be five, seven days of borrowing. Or on the left, taxing rich people more.

There is a great paper out of the Manhattan Institute from about three, four months ago that talks about if you did tax maximization on everyone earning at least $400,000—maximized every tax: estate tax, income tax, etc. to the point where you got peak tax receipts before you started to lose receipts—and adjusted it for its economic effects, you might get 1.5 or 2% of the entire economy. And for many of us on the right who want to cut things, we can only come up with 1 to 2% of cuts in government GDP. That is a lot of money, but—and I am doing this math off the top of my head—I think we have borrowed about 9.6% of the entire economy so far this fiscal year, in a year when the economy is actually pretty good.

So the left's idea only gets you 1.5 to 2% of GDP, and the right’s idea gets you another 1 to 2%, but in a time of good economy, you are borrowing 9.6% of GDP. Do you see a math problem?

Kevin Kosar:

Yeah, I recall that paper you referenced by Brian Riedl at Manhattan Institute. He is a fearless truth teller, knows his stuff, and unlike you or other legislators, he does not have to face voters so he can give the unpleasant facts of the matter. 

Some time back, I spoke with a budget expert who reminded me that it was the habit of the US government since the Founding to try to have a roughly balanced budget over the long run. You hit rough times, a war, or other problems that cause you to run deficits, but then you turn around and make some adjustments and get yourself back to where you are supposed to be. That was Paul Winfree, who used to be at Heritage and now has his own organization.

That seems to have been lost. Everybody seems to want to talk about running structural deficits as a problem